New ag land values might anger some

Farmers, ranchers could be confused about large jump

Farmers, ranchers could be confused about large jump

July 28, 2009|BY SCOTT WALTMAN, swaltman@aberdeennews.com

A new way of figuring the value of agricultural land in South Dakota could double assessments for some parcels of farmland, Brown County's assessor says. That's a concern for Mary Worlie, director of equalization. She thinks some farmers and ranchers will be angry when they get their assessments next year. State Rep. Paul Dennert, D-S.D., agrees that there is the potential for some ag land to double in value, including some of his property. Still, he supported the change to the so-called production model. "It isn't self-serving," he said. That might be the case, but Worlie still has concerns. One is that there has been confusion about phasing in new values. State law says that the overall value of ag land in a county can increase only 10 percent annually under the new system. But that stipulation doesn't apply to the acres owned by an individual, so those values could jump considerably in a single year Most farmers and ranchers don't understand how much their land could increase in value, she said. The new model will base ag land values on how productive land is based on yield data from the U.S. Department of Agriculture and the National Agricultural Statistics Services. Worlie is philosophically opposed to the change. Now, land values are determined by looking at the sales of similar property. Even under the market method, which has long been in place, as much as $18 billion in ag value is not assessed because of a law that prevents property sold at more than 150 percent of its assessed value from being used in figuring other assessments. With the change to the production model, the current level of ag land - roughly $17.5 billion statewide - will be locked in to keep the system revenue neutral. However, Worlie said, that means the extra value will be lost forever. She's also worried about being able to make adjustments to formula-determined ag land values. State officials say changes can be made to account for land that's hilly, in a valley, has rocks or gets a lot or very little rain. Worlie, though, said the law lacks specificity about adjustments. She said she has to be able to defend in court any value she places on land. Information sent out by the state Department of Revenue and Regulation says that directors of equalization will need to make adjustments "to ensure uniform and fair valuations" within a county. Statewide, the production model must be revenue neutral. So if value goes up in one county, it must decrease in another county. The appeals process for people who don't like their property value under the new model says that landowners should consider a challenge if they can't sell their property for the new assessed amount or if it's out of line with values for similar land. Those are the staples of the market method. Considering the change to the production model, that doesn't make sense to Worlie. Dennert said he thinks Worlie could simply raise the value of all Brown County ag land by 10 percent in 2010. He said he knows Worlie is leery of the new formula and might be reluctant to make adjustments for individual parcels or do a flat 10 percent increase. But he thinks the system has more flexibility than Worlie gives it credit for. Worlie said much of the land in Brown County that be hit with big jumps in value is of marginal quality. Meanwhile, the best land in the county will probably decrease in value, she said. As a result, it's likely that people with worse ag land will wind up paying more property taxes in 2011. Dennert agrees that under the production formula, low-quality land likely will net higher assessments. In many cases, that's because the land will be assessed at its "highest and best" use as opposed to its actual use. For example, Dennert said, he has a piece of property that is now grassland. Its highest and best use would be as cropland, and his 2010 assessment, which could potentially double, will reflect that, he said. But, he said, it's his choice to keep the parcel as grassland. Portage Township landowners, in the northeast corner of Brown County, are likely among those who will see significant increases because of land quality, Worlie said. While there will be some large increases in value, the production model is more forgiving than other potential changes to the way ag land could be assessed, Dennert said. Including the full value of ag land statewide - including that eliminated by the 150 percent rule - would lead to more producers seeing significant increases in value, he said. "And I will continue (to believe that) until I'm proven wrong," Dennert said. But, Worlie said, by using true values, at least her office would be dealing with "real numbers" that reflect honest values. If needed, ag land could be given a tax break by using a lower mill levy, she said. Production method training workshops for county assessors and their staffers will be scheduled around the state in August and September, Worlie said. The public will be invited to those meetings to learn more about the new system. To date, though, counties have not received training, although they do have the basics of the formula and can crunch some preliminary numbers. Those numbers, though, could make property owners angry, Worlie said. And she worries that she could lose office workers who tire of being yelled at. But, she said, she will use the new model even if she doesn't like it. "I told the Legislature, 'I can implement this,'" Worlie said. "But I can't sell it.'" The new model will base ag land values on how productive land is based on yield data from the U.S. Department of Agriculture and the National Agricultural Statistics Services. American News Photo by John Davis Information sent out by the state Department of Revenue and Regulation says that directors of equalization will need to make adjustments "to ensure uniform and fair valuations" within a county. Statewide, the production model must be revenue neutral. So if value goes up in one county, it must decrease in another county.